Simply put, the federal government could not function without the valuable service that the IRS provides. And most Americans understand just how important the IRS is, even if they hate the idea of parting with their money.
Still, there are good reasons to dislike the IRS (and the federal legislators who create tax laws in the first place). It seems like nearly every transaction we make and every asset we acquire is taxable and/or must be reported. In today's post, we'll discuss some IRS reporting requirements that many people may be unaware of.
In addition to reporting your income in the form of a W-2 (for most employees), the IRS wants to know about income earned from any and all other sources. Taxable and reportable income can include:
- Sales of your used vehicles, furniture, family heirlooms and nearly anything else that you sell
- Any item that you purchased and then re-sold at a higher price
- Any cash payments related to limited odd jobs like babysitting, yard work, taking a friend to the airport, etc.
- Gambling winnings
- Winnings from the lottery
- Winnings from prizes and awards (cash value of items may be considered)
- Any debt you owe that has been cancelled or forgiven (referred to a "cancellation of debt")
- Cash tips received on the job
- The market value of services and goods, including non-financial barters between you and another person
- Cash value of any unusual sources of income, including accidental finds (used furniture with cash hidden inside, for instance)
If any of these reportable/taxable income sources seem outrageous to you, you're certainly not alone. The majority of people would not report certain income sources (barters and second-hand sales, etc.), because it would be very difficult for the IRS to discover them. Nonetheless, the fact that they are taxed in the first place does not sit well with many Americans.
Hopefully, you will never be investigated for failing to report any of the items listed above. If you do find yourself facing an IRS audit (for any reason), please seek the help of an experienced tax law attorney.